The baht depreciation softened in April, supported by the Thai economy's improving momentum, while a central bank executive expects the local currency to strengthen in the second half of this year.
During the first quarter of 2024, the baht weakened by 7.8% against the US dollar, marking the second-largest depreciation rate in Asia, trailing only the Japanese yen, which fell by 9.6%.
The South Korean won ranked third in Asia, depreciating 6.5%.
However, Sakkapop Panyanukul, senior director for financial markets at the Bank of Thailand, said the baht depreciated less last month, declining 1.7% against the dollar, while the won fell 2.2%.
Year to date, the dollar has appreciated by 4.4% on average against other currencies worldwide.
The baht recently weakened to 37 to the dollar, marking its lowest rate in 6.5 months.
This movement aligns with regional currencies, primarily driven by the strength of the dollar, he said.
"The US Federal Reserve is expected to postpone its policy rate cuts, bolstering the greenback against other global currencies," said Mr Sakkapop.
Market forecasts suggest the Fed will reduce its policy rate just once this year, bringing it to 4.99%.
He said the Bank of Thailand expects the baht's depreciation against the greenback to continue to improve in the second half of this year, aligning with the country's economic momentum.
This momentum is expected to stem from tourism, private consumption and public spending.
The government's budget disbursement for fiscal 2024 is expected to begin in the second quarter this year, contributing to economic growth.
In addition, foreign tourist arrivals are forecast to reach 35.5 million this year, up from 28.2 million in 2023.
Private consumption is expected to expand by 3.5%, albeit at a slower pace from 7.1% the previous year, attributed to a high base effect, noted the central bank.
"Even though the Finance Ministry cut its Thai economic growth forecast for this year, the central bank believes its growth projection of 2.6% remains on track," Mr Sakkapop said.
The Fiscal Policy Office recently downgraded its Thai GDP growth forecast for 2024 to 2.4%, dipping from 2.8%.
In a related development, the central bank said the Thai economy slowed in March as domestic demand and the tourism sector softened, while the benefits from the "Easy E-Receipt" campaign dissipated.
Despite this slowdown, the economy showed signs of improvement in the first quarter compared with the fourth quarter of 2023, though growth is likely to remain low on a year-on-year basis, according to the regulator.
Tourism continues to be the main driver of economic activity within the service sector, leading to increased employment, noted the central bank.